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Cite as: [1873] ScotLR 10_473, [1873] SLR 10_473

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SCOTTISH_SLR_Court_of_Session

Page: 473↓

Court of Session Inner Houre First Division.

Friday, June 13. 1873.

[ Lord Gifford, Ordinary.

10 SLR 473

Arkley and Others (Hay's Trustees). Petitioners.

Subject_1Trusts Act 1867, § 3
Subject_2Intention.

Facts:

A truster left his estates to trustees with directions to pay his debts and an annuity to a nephew out of the rents of his landed estates and the proceeds of his other property, and he also expressly prohibited the trustees from selling any part of the landed estate, which they were directed to entail. On his death it was found that his entire income was not sufficient to meet the burdens on his estate exclusive of the annuity. The trustees applied to the Court for authority to sell a portion of the landed estate, entailing the remainder; held, that in the face of the truster's prohibition of sale the Trusts Act 1867, sec. 3, did not apply, and that the Court could not assume an intention on the part of the truster at variance with the express words of his trust deed.

Headnote:

This was a petition under the Trusts Act by the trustees of the late Mr Hay, of Letham, for authority to sell a portion of the trust-estate. The directions of his settlement were to realise his estate other than landed estate, and to apply the proceeds, together with the rents of his landed estate, in payment of his debts, including an annuity of £750 created by a separate bond of annuity in favour of his nephew Alexander Hay Miln, of Woodhill; but the trustees were expressly forbidden to sell any part of his landed estates in the counties of Forfar and Perth, which they were to hold till the debts were paid off, and in any event for twenty-one years, during which Mr Miln's annuity was never to exceed one-third of the free rental of the estates. By a codicil there was a provision for extinguishing the debt by an annuity arrangement with an insurance company, to expire in not more than fifty or less than forty years; and when the debt was all paid the trustees were to hold the trust for behoof of Mr Miln if alive, and if he was dead, they were to execute an entail in favour of his son and a series of heirs. Mr Hay hoped that thus his personal property and the rents of his landed estates would suffice in time to pay off his debts, but in this he was mistaken, for the trustees found themselves in possession of an estate yielding a gross rental of £5035, while the interest on debt and other burdens amounted to £5141, leaving a deficiency of £106 per annum, and this without any payment of annuity to Mr Miln.

In these circumstances, they craved authority to sell lands to the extent of about £2000 or £2500 of rental, the full proceeds to be applied in extinction pro tanto of the heritable debt. The petition was served on Mr Miln and on the three next having interest in the annuity and the estates. He lodged answers, in which, while concurring in the general object of the petition, he asked that a larger portion of the trust-estate should be sold, so as to provide to some extent for the payment of his annuity. The Lord Ordinary, after a remit to Mr T. G. Murray, W.S., granted the prayer of the petition.

Mr Hay Miln reclaimed.

At advising—

Judgment:

Lord President—This is an application by the trustees of the late Mr Hay, of Letham, for authority to sell part of his heritable estate, and the petition is based on sec. 3 of the Trusts Act of 1867. The circumstances of the case are peculiar. Mr Hay left a trust-disposition with two codicils, the effect of which was that he directed his trustees to pay his debts out of his estates other than the landed estates in Forfarshire, which they were expressly prohibited from selling. The prohibition is thus expressed:—“My trustees shall with all convenient speed apply the trust property, excepting my landed estates particularly above named, no part whereof they shall have liberty to sell,” &c. Now he further provided that his nephew, the respondent, who appears to have been his nearest relation, should receive an annuity of £750, secured by a bond of annuity. The trust was to endure for twenty-one years, and the truster apparently hoped that in that time his property, other than the estate of Letham and the rents of that estate, would be sufficient to pay off his debts, but in this expectation he was mistaken, for the income of the estate was not sufficient to pay off the annual burdens, even after applying to that purpose all the rest of the available property. There was a deficiency of £106 a year. Now the expediency of granting the prayer of this petition is clear—indeed the trust is unworkable otherwise; but the first question is whether its object can be attained under sec. 3, or whether the trustees must not go to Parliament for a private Act. It is true that the Act of 1867 was intended to save the necessity of doing so, and I should be prepared, generally speaking, to give it as wide an interpretation as possible, but the words of sec. 3, clause 1, are those on which the difficulty arises, for I do not think, with the Lord Ordinary, that sec. 19 creates any difficulty. Section 3, however, authorises the Court to grant powers of selling, on condition of “being satisfied that the same is expedient for the execution of the trust, and not inconsistent with the intention thereof.” It may be expedient that the trustees should have power to sell, but we must look whether that be not inconsistent with the intention of the truster. Now the truster's intention is clear; the estate was not to be sold. The

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very reason for creating the trust at all was that the trustees might redeem the estate and entail it as directed, and it is hard to say now that he intended that any part of it should be sold; and further, the words which I have already quoted appear to me to be an express prohibition. The Lord Ordinary supposes that the truster had two purposes, to pay his debts and to entail his estate; and he suggests that as his object cannot be carried out completely as he wished it, the next best thing to do is to sell one half of the estate and entail the other; but that is simply a guess as to what would have been the truster's intention, and I do not think we can substitute a mere conjecture for the clear expression in the trust-deed. I am of opinion that we ought to refuse the petition.

The other Judges concurred.

The Court pronounced the following interlocutor:—

“Recall the said interlocutor, and refuse the petition, and decern; and authorise the petitioners to pay out of the trust-funds the expenses of both parties as the same may be taxed: Appoint accounts of said expenses to be given in, and remit the same, when lodged, to the Auditor to tax.”

Counsel:

Counsel for the Reclaimer—Solicitor-General ( Clark). Agents— Dundas & Wilson, C.S.

Counsel for the Respondents— Watson and Mackay. Agent— Alexander Howe, W.S.
1873